IfM Bonn welcomes immediate measures for Mittelstand businesses
"In this difficult economic period, the German government has sent a very positive signal with its comprehensive support measures for both large corporations and Mittelstand businesses. Also the focus on the solo self-employed is positive," explained Prof. Dr. Friederike Welter (IfM Bonn/University of Siegen). "Nevertheless, it is currently difficult to estimate how long the pandemic-induced crisis will last." The IfM researchers have therefore considered two different crisis scenarios for Mittelstand businesses in order to better assess the economic consequences for and on these businesses.
Thanks to the good profit situation in the years before the Covid 19 pandemic, which started at the beginning of March, the equity ratio of most small and medium-sized enterprises (SMEs) was significantly better than at the beginning of the financial crisis in 2008/2009: in 2017, it was 29 %, almost on a par with the equity ratio of large companies (32 %).
"Thanks to strong growth rates in recent years, micro-enterprises on average have equity ratios similar to those of large enterprises. However, the proportion of micro-enterprises that have no equity capital at all on their balance sheets is significantly higher than that of larger companies. About one in four enterprises - i.e. about 770,000 enterprises with a turnover between 17,500 euros and a maximum of one million euros per year - have no equity capital. For them, the risk of liquidation is currently significantly higher than for the larger companies," says the IfM president. "Of the almost 340,000 companies in the retail sector with a turnover between 17,500 euros and a maximum of one million euros per year, the number is estimated to be equal to 110,000 companies."
The measures such as short-time work, the announced credit assistance, which the federal government has initiated in recent days, help to ease the burden on employers. Of particular importance, however, is the emergency aid fund for the solo self-employed and micro-enterprises, which provides graduated one-time payments for bridging a period of three to five months.
"For most Mittelstand businesses, a short-term crisis should not necessarily lead to liquidation. The situation could be different for micro-enterprises and economic sectors without services or marketing channels that can be digitised, such as in the culture, entertainment and leisure industry, in tourism and the hospitality industry. In these sectors, the lost revenues cannot be made up once the crisis has subsided. We therefore recommend a differentiation of aid depending on the extent to whicht respective sectors are affected by the crisis," says Prof. Dr. Friederike Welter. In the past, basic assistance (so called Grundsicherung) has also proven itself in principle as an instrument for overcoming short-term business crises. So far, however, aid was only granted after an asset assessment, which is now being suspended in the course of the current measures.
If the standstill lasts longer than 6 months, not only is a higher liquidation rate to be expected, but the negative economic consequences are also likely to spread to other sectors with a strong Mittelstand as well as to suppliers. The IfM researchers therefore welcome the suspension of the obligation for companies to file for insolvency. At the same time, they point out that the protective shield procedure (so called Schutzschirmverfahren) in insolvency law also offers an opportunity for crisis resolution.